Case is about how, not why

TORONTO, ONT. – After more than three months of questioning and cross-examinations and more than five years since “the letter” and the subsequent six days in May, closing arguments have commenced in the GMCL non-retained dealer civil case.

“We’ve waited a long time for this,” Marvin Starr, former owner of Marvin Starr Pontiac Buick GMC, said outside the University Ave. courthouse Wednesday morning. “It will be nice to see it end.”

The plaintiff class wrapped closing submissions Wednesday evening after a full day reviewing the highlights of the trial that started on Sept. 9.

General Motors’ legal team were set to begin closing arguments Thursday followed by the lawyers representing Cassels Brock and Blackwell (CBB), which is also named as a defendant.

The plaintiffs, represented by Trillium Motor World but composed of roughly 180 so-called “deleted dealers,” are seeking $750 million in damages from the automaker and CBB related to the May 2009 dealer wind-down agreements. The class is dealers who signed the wind-down agreements that effectively terminated their franchises.

David Sterns of Toronto law firm Sotos LLP, which is representing the dealers, told the Ontario Superior Court this case is about the how, not the why – referring to the methods GMCL used to trim its dealer network ahead of it government ordered restructuring in 2009.

GM had originally cut 240 dealers from its network as it shuttered Pontiac and Saturn and attempted to sell Hummer and Saab. Affected dealers were sent a letter on May 20, 2009 notifying them their DSSAs would not be renewed. Dealers were given six days to either sign the supplied wind-down agreement or risk getting nothing for their business.

“How could GM accomplish this in six days without running afoul of the Wishart Act?” Sterns asked the court. “It could not be done in six days.”

Key to the plaintiff’s case has been the idea of good faith and fair dealing related to the Arthur Wishart Act – an Ontario statute designed to protect franchise business owners that, in part, requires parent companies to provide a disclosure document that contains accurate, clear and concise information including financial statements and the proposed franchise agreement prior to signing any contracts.

Legal experts have said this case will decide if the Wishart Act applies when a franchisor is going through financial challenges or if the duty of fair dealing only applies in fair weather.

Sterns told the packed courthouse and Justice Thomas McEwen that GMCL had known it needed to reduce its dealer network for years prior to the financial crises that hit global markets in 2008. Despite investing in Project 2000 – a program patterned from its U.S. counterparts that sought to assess GMCL’s dealer network and assist the company in its effort to rationalize the network – it had not effectively dealt with its overdealering issue for roughly nine years.

Yet when insolvency became a potential reality in the latter half of 2008 and government monies were being sought on both sides of the border, Sterns argued GMCL was more than willing to quickly trim its dealer body quickly.

He said dealers had been told for months, primarily by Marc Comeau who, at that time was GMCL’s V-P of sales, service and marketing (he has since been transferred to GM operations in South Korea), that the automaker was committed to working through issues with the dealers.

Sterns quoted HIDL broadcasts from 2008 and 2009 where Comeau told dealers there was “no need to panic” and that “we’ve demonstrated that when we put our collective shoulder to the wheel, we get results.”

In an April 27 broadcast, dealers were informed about the phase out of Pontiac but told it was not a termination of any dealer agreements but rather that the automaker would grow volume with other lines to compensate and improve profitability and throughput.

Dealers were told that GMCL hoped to achieve dealer consolidation at this time through normal attrition and retirement amongst the dealer network.

“How could it not be a shock if this what was being communicated to them?” Sterns added.

The court also heard of a meeting GM and GMCL officials had in Washington, D.C. on May 14, 2009 where the plan was discussed to offer a short wind-down timeline to Canadian dealers. A May 15 HIDL broadcast, Sterns said, made no reference to the plan but said GMCL was working on solutions and they were hopeful to roll out plans by the end of May or early June.

The termination letter was sent out May 20.

“This you cannot reconcile with what was going on behind the scenes at GM… it is exactly what fair dealing was created to prevent,” Sterns said. He further characterized the move as “intentional” and an “ambush.”

Standing outside the court during an afternoon break, Jerry Gazarek put the entire case into perspective.

The former two-store owner who lost both rooftops in the 2009 restructuring said current dealers should be paying close attention to what happens in this case.

“This is more about the dealers now than it is for us. If we lose this, it will set current dealers back 50 years in terms of their relationship with the OEMs,” he said.

Final arguments should wrap by Dec. 19. A ruling is not expected for several months.